- (1.) These two appeals involve a common question and can be disposed of by a common judgment. The question is whether the appellant companies (hereinafter referred to as the 'assessees') are entitled to full "drawback" of the customs duty which they had paid on the import of di-methyl-terephthalate (shortly referred to as 'dmt') for manufacture of polyester staple fibre yarn. The assessees converted the DMT into polyester staple fibre in their factory at Thane and then sent it to Bhilwara in Rajasthan where the Rajasthan Spinning and Weaving Mills blended it with indigenous viscose staple fibre to spin out certain varieties of blended yarn. It is common ground that the product manufactured by this process was exported by the assessees to Imperial Chemical Industries Pvt. Ltd. , Singapore, who had supplied the DMT free of charge to the assessees. The answer to the question revolves around the interpretation of S. 75 of the Customs Act, 1962 read with the Customs and central Excise Duty Drawback Rules, 1971.
(2.) S. 75 of the Customs Act, 1962 empowers the central government, by notification in the official Gazette, to direct, in respect of goods of any class or description manufactured in India and exported to any place outside India, that drawback should be allowed of the duties of customs chargeable under the Act on any imported materials of a class or description used in the manufacture of such goods, in accordance with and subject to the rules framed under Ss. (2 of the said section. Ss. (2, which confers a rule making power, enacts that such rules may, among other things, provide: "75.(2 (A) for the payment of drawback equal to the amount of duty actually paid on the imported materials used in the manufacture of the goods or as is specified in the rules as the average amount of duty paid on the materials of that class or description used in the manufacture of export goods of that class or description either by manufacturers generally or by any particular manufacturer;"there is a similar provision in S. 37 of the central Excises and Salt Act, 1944 enabling grant of drawback of the excise duty paid in relation to such manufacture.
(3.) The central government framed the Customs and central Excise Duties Drawback Rules, 1971 (hereinafter referred to as 'the Rules') , in exercise of the powers conferred on it under these two statutes. These are composite rules under the above two provisions and enable drawback being availed of in relation to customs duty as well as in relation to duties of central excise. Some relevant provisions of these rules may be quoted here. Rule 3, insofar as it is relevant for our present purposes, reads as follows: "3.Drawback. (1 Subject to the provisions of- (A) the Customs Act, 1962 (52 of 1962 and the rules made thereunder, (B) the central Excises and Salt Act, 1944 (1 of 1944 and the rules made thereunder, and (C) these rules, (A) drawback may be allowed on the export of goods specified in Schedule II at such amount, or at such rates, as may be determined by the central government. (2 In determining the amount or rate of drawback under this rule, the central government shall have regard to: (A) the average quantity or value of each class or description of the materials from which a particular class of goods is ordinarily produced or manufactured in India, (B) the average quantity or value of the imported materials or excisable materials used for production or manufacture in India of a particular class of goods, (C) the average amount of duties paid on imported materials or excisable materials used in the manufacture of semis, components, and intermediate products which are used in the manufacture of goods, (D) the average amount of duties paid on materials wasted in the process of manufacture and catalytic agents: Provided that if any such waste or catalytic agent is used in any process of manufacture or is sold, the average amount of duties on the waste or catalytic agent so used or sold shall also be deducted, (E) the average amount of duties paid on imported materials or excisable materials used for containing or packing the exported goods, (F) the average amount of duties of excise paid on the goods specified in Schedule 1; and (G) any other information which the central government may consider relevant or useful for the purpose. 4 Revision of rates. The central government may revise the amounts or rates determined under Rule 3. 6. Cases where amount or rate of drawback has not been determined. (1 (a) Where no amount or rate of drawback has been determined in respect of any goods, any manufacturer or 15 exporter of such goods may, before exporting such goods, apply in writing to the central government for the determination of the amount or rate of drawback therefor slating all relevant facts including the proportion in which the materials or components are used in the production or manufacture of goods and the duties paid on such materials or components. (B) On receipt of an application under clause (a) the central government shall after making or causing to be made such inquiry as it deems fit, determine the amount or rate of drawback in respect of such goods. 7. Cases where amount or rate of drawback determined is low. (1 Where in respect of any such goods, the manufacturer or exporter finds that the amount or rate of drawback determined under Rule 3 or, as the case may be, revised under Rule 4 for that class of goods is less than three-fourths of the duties paid on the materials or components used in the production or manufacture of the said goods, he may make an application in writing to the central government for fixation of the appropriate amount or rate of drawback staling all relevant facts including the proportion in which the materials or components are used in the production or manufacture of the goods and the duties paid on such materials or components. (2 On receipt of the application referred to sub-rule (1 the central government may, after making or causing to be made such inquiry as it deems fit, allow payment of drawback to such exporter at such amount or at such rate as may be determined to be appropriate if the amount or rate of drawback determined under Rule 3 or, as the case may be, revised under Rule 4, is in fact less than three-fourths of such amount or rate determined under this sub-rule. ";